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UK digital investment doubles, but AI's growth impact questioned

Created at 24 Aug · 11:06 AM1 source↑ Market-relevant
IN SHORT

Official data shows UK investment in digital infrastructure has nearly doubled since 2019, reaching £11.6bn in 2024, driven by data centres and software. However, economists question if AI is truly boosting productivity growth.

Key Numbers

£6.3bnUK digital infrastructure investment in 2019
£11.6bnUK digital infrastructure investment in 2024
94%Increase in data centre and fibre optic cable investment since 2019
£5.6bnInvestment in data centres and fibre optic cables in 2025
171Data centre construction projects tracked by Barbour ABI
2030Year by which data centre investment could quadruple
33%Proportion of businesses adopting AI in 2026
1.1%Annual productivity growth since late 2024 (Resolution Foundation)
0.2%Annual productivity growth since late 2024 (ONS estimate)
1.8%Private sector productivity growth over 12 months in Q2
3Years AI has had 'no material impact' on headcount

Who's Involved

Office for National Statistics (ONS)
Official data body that revised digital infrastructure spending calculations
Barbour ABI
Tracked 171 data centre construction projects
Resolution Foundation
Left-leaning think tank arguing for a UK productivity boom
Morgan Stanley
Wall Street bank that noted UK productivity growth
London School of Economics (LSE)
Institution that separately argued for a UK productivity boom
Pantheon Macroeconomics
Consultancy warning that AI is not yet boosting worker output
Rob Wood
Economist at Pantheon Macroeconomics
Elliott Jordan-Doak
Economist at Pantheon Macroeconomics
Bank of England
Conducted survey on AI's impact on headcount
UK digital investment doubles, but AI's growth impact questioned

↳ Why This Matters

The significant increase in digital infrastructure investment, particularly in data centres, highlights the growing importance of technology for economic activity. However, the debate among economists over whether AI is genuinely driving productivity growth raises questions about the long-term economic benefits of this investment and the future of the UK's economic trajectory.

Key facts

  • UK business investment in digital infrastructure rose from £6.3bn in 2019 to an estimated £11.6bn in 2024.
  • The ONS revised its calculations to include data centres, software, and cables, aligning with international standards.
  • Investment in data centres and fibre optic cables alone was estimated at £5.6bn in 2025.
  • Over a third of businesses with 10 or more employees were adopting AI in 2026.
  • Economists question whether AI is the primary driver of recent productivity gains.

Official data from the Office for National Statistics (ONS) reveals that investment in digital infrastructure in the UK has nearly doubled since 2019, reaching approximately £11.6 billion in 2024. This revised calculation, which now includes spending on data centres, software, and cables, brings the UK in line with international standards. Investment in assets such as data centres and fibre optic cables alone was estimated at £5.6 billion in 2025, marking a 94% increase since the start of the pandemic.

The ONS noted that the growing importance of data centres is reflected in this investment surge. Furthermore, projections suggest that current investment levels in data centres could quadruple by 2030, with 171 construction projects already being tracked. The ONS revised its methodology partly to better track AI-related investment, as business surveys indicate that over a third of companies with 10 or more employees were adopting AI in 2026.

Despite these figures and general optimism about the UK's productivity, leading economists have expressed skepticism about AI's direct contribution to higher growth. Analysts from the Resolution Foundation, Morgan Stanley, and the London School of Economics have separately highlighted a UK productivity "boom." However, the Resolution Foundation's analysis, based on payroll data, suggests productivity has been expanding by 1.1% annually since late 2024, a figure significantly higher than the ONS's estimate of 0.2%.

Pantheon Macroeconomics cautioned that there is "little evidence" to suggest AI is making workers more productive per hour. While AI adoption is increasing, data indicates it has not led to substantial headcount reductions. Surveys show that the majority of businesses report AI having "no material impact" on their workforce size, and job cuts attributed to AI remain low and stable. Economists Rob Wood and Elliott Jordan-Doak noted that AI's impact on vacancies and employment is equivocal, likely reflecting both job displacement and increased demand for certain roles. They suggest that while "big changes are afoot beneath the surface," current productivity gains may not signal a sustained trend.

Frequently asked questions

The Office for National Statistics (ONS) estimates that business investment in digital infrastructure reached approximately £11.6 billion in 2024.

The increase is driven by investments in data centres, software for IT systems, cables, and other digital infrastructure.

Economists are divided, with some noting a productivity boom but others finding little evidence that AI is significantly increasing worker output per hour or leading to material headcount reductions.

It is projected that current investment levels in data centres could quadruple by 2030, supported by 171 tracked construction projects.

What Happens Next

01Further analysis of AI's impact on productivity is expected from various economic institutions.
02Future ONS data releases will provide updated figures on digital infrastructure investment and AI adoption.

How It Developed

UK business investment in digital infrastructure surged from £6.3bn in 2019 to an estimated £11.6bn in 2024.
Revised ONS calculations now include data centres, software, and cables, aligning UK standards with other major economies.
Investment in assets like data centres and fibre optic cables reached £5.6bn in 2025, a 94% increase since 2019.
Around 171 data centre construction projects could quadruple investment by 2030.
More than a third of businesses with 10+ employees were adopting AI in 2026.
Economists from Resolution Foundation, Morgan Stanley, and LSE noted a UK productivity boom.
Resolution Foundation data suggests productivity grew 1.1% annually since late 2024, contrasting with ONS's 0.2% estimate.
Morgan Stanley reported private sector productivity at 1.8% over 12 months in Q2.

Sources

T1
Digital investment nearly doubles since 2019 yet AI’s growth contributions questionedCity AM

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